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Amkor Technology (AMKR) Down 4% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Amkor Technology, Inc. (AMKR - Free Report) . Shares have lost about 4% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is AMKR due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

 

Amkor Technology (AMKR - Free Report) Q1 Earnings Miss, Revenues Beat

Amkor Technology, Inc. reported first-quarter 2018 adjusted earnings of 4 cents per share, missing the Zacks Consensus Estimate by a penny.

Revenues of $1.025 billion slightly surpassed the Zacks Consensus Estimate of $1.020 billion.

The company has been making efforts to channelize its resources in important growth areas like automotive and increased investments in Greater China. In this regard, Amkor invested huge amounts in the Shanghai factory and Greater China sales team to attract more business.

Moreover, the company remains optimistic about growth in its automotive business. Per market forecast, the automotive market will grow in high single digits in the coming years. The growth is expected to be driven by increasing electronic content. Given its attractive value proposition for automotive customers, the company is poised to benefit ahead.

Revenues

Revenues of $1.025 billion decreased 10.9% sequentially but increased 14% year over year. The year-over-year increase was driven by strength in nearly all its end markets, particularly automotive. The sequential decline was due to weakness in the communication market.

Also, revenues came in above the Zacks Consensus Estimate of $1.020 billion and within the company’s guidance of $0.98-$1.06 billion.

Revenues by Product Lines

The revenue mix in terms of product lines is discussed below.

Advanced Products include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 47% of first-quarter revenues. Revenues decreased 18.2% sequentially but increased 26.6% year over year.

Mainstream Products include lead frame packages, substrate-based wire bond packages and MEMS packages. It accounted for the remaining 53% of first-quarter revenues. Revenues decreased 3.3% sequentially but increased 5% year over year.

Margins

Per the press release, gross margin was 15.4%, up 30 basis points (bps) from the year-ago quarter. The increase was backed by higher revenues. Also, the completion of factory consolidation in Japan aided gross margins in the quarter.

Operating expenses of $121.7 million increased 3.2% year over year. As a percentage of sales, both selling, general and administrative expenses, and research and development expenses decreased.

As a result, operating margin was 3.5%, up 150 bps from the prior-year quarter.

Balance Sheet & Cash Flow

During the reported quarter, cash flow from operations was $147.6 million compared with $204 million in the prior quarter. Capex was $230.6 million compared with $137 million in the prior quarter.

Total cash, cash equivalents and restricted cash were $497.2 million in the first quarter, up from $598.4 million in the prior quarter. The company improved its net debt position from over $1 billion in 2015 to around $750 million at the end of 2017.

2Q Guidance

For the second quarter, Amkor expects revenues in the range of $990 million to $1.07 billion, up 2% year over year. The Zacks Consensus Estimate is pegged at $1.07 billion. Gross margin is expected within 14-16%. Earnings per share are expected in the range of (2 cents)-10 cents on a GAAP basis.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

VGM Scores

At this time, AMKR has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. The stock was also allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Interestingly, AMKR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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